27 March 2009

Fly on the Wall

Germany's entertainingly outspoken Finance minister Peer Steinbrück has invited one of his chief critics to a private meeting in Berlin.

Paul Krugman, an American economist with a regular column and a blog in the New York Times, takes regular pot shots at Hr Steinbrück, referring in a recent column to the "know-nothing diatribes of the German finance minister". The Minister even received an entire blog posting from Krugman: The economic consequences of Herr Steinbrueck.

Krugman is certainly not lacking in self-confidence. The column mentioned above begins with the sentence: "I'm concerned about Europe." No doubt this self-confidence - or, perhaps arrogance - was further reinforced by the Nobel Committee who awarded him their 2008 Nobel Prize in Economics.

Nonetheless, if Krugman accepts the invitation (and he should be able to afford the flight with his Princeton post, his NYT columns and his 10,000,000 Kroner Nobel Prize fund) my money is on Hr Steinbrück.

While having a Nobel Prize in Economics might sound impressive, The Royal Swedish Academy of Sciences have spent the last ten years regularly awarding the Prize to the too-smart-for-their-own-good idiots whose economic theories have landed us in the current mess.

Most famously - or infamously - they awarded the 1997 Prize to Myron Scholes and Robert C Merton "for a new method to determine the value of derivatives". At the time Scholes and Merton were putting their 'new method' to use with Long Term Capital Management - a hedge fund - which turned out to be more a case of Short Term Capital Destruction and had to be bailed out to the tune of $3.6 billion the following year.

So I think it is safe to say that the Nobel Prize in Economics has about as much credibility as those in Literature and Peace.

The clincher, though, is an earlier column from Krugman; an embarrasing song of praise to the financial genius of Gordon Brown - yes, that Gordon Brown.

Has Gordon Brown, the British prime minister, saved the world financial system? Krugman asks in his opening sentence. Obviously with 800 words still to go he isn't going to come out with a straight Yes! Instead, he switches into full cheer leader mode.

Brown and Darling have defined the character of the worldwide rescue effort. Gordon Brown's government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn’t been matched by any other Western government.

Eventually he does manage a conclusion: Luckily for the world economy...Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis.

Proof positive I would suggest. Anyone capable of such a magnificent, almost awe-inspiring, lack of judgement about the infernal Brown stands no chance against Hr Steinbrück.

1-0 to the Germans, I think.

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